Sushil Kumar Modi, chairman of the empowered committee of state finance ministers, wants legal assurance of compensation to states for loss of revenue on implementation of the proposed national Goods and Services Tax (GST).

“Though the Centre has agreed to compensate the loss, the states want legal assurances from the Government of India, as they stand to lose revenue in the initial years of GST rollout,” said Modi, also the finance minister (and deputy chief minister) of Bihar.

He said the proposed GST Act should have a provision on compensating states for at least five years after the migration to the new tax regime. Modi was speaking at Utkal Chamber of Commerce and Industry, an apex body of trade and business representatives in the state.

The empowered panel of ministers had convened in this city on the GST issue and reached an important agreement, on central sales tax compensation, which removes a key roadblock to progress on the proposed law. Modi said it had been a historic meeting.

The delay in GST rollout was not, he stressed, due to disagreement among the states but because of the failure of the government to get the Constitution amendment bill in question through Parliament — again, due to the Centre’s inability to carry other parties with it. Parliament’s standing committee on finance had, he noted, been examining the Bill since 2011. There would be no way to implement GST, he said, without a consensus between the Congress and Modi’s own Bharatiya Janata Party, the country’s two largest political groupings. (Views of the states)

The Bill seeks to give concurrent taxing powers to both Centre and states and suggests creating a GST Council and a GST Dispute Settlement Authority. Modi said, “We are slowly inching towards GST implementation and the empowered committee (of ministers) is trying its best to address the issues.” He urged traders to be mentally prepared for the change in tax regime, as implementation of GST was inevitable.